With a collection of fellow space VCs last night, I noted how investment in the sector has exploded over the past five years. Over 500 different VC firms have recently invested in a space startup — where did it all go?
Well, the category with the most direct competitors is the small-sat launch market. With over 145 competing firms [now 180], I wondered if any sector in any industry has ever had more venture-backed competitors? We could not think of any. Here’s a list of most of them (it’s missing Paul Allen’s Stratolaunch and many billions of invested capital, and for comparison, the current mainstream launch list prices are $1K to $3K per kg to LEO, so these new entrants are forecasting that they will enter the market at a 10-50x cost disadvantage to today’s prices).
Everyone on the panel has invested in a launcher company or two (including myself if we count my 2009 investment in SpaceX and the now-retired Falcon 1. But the master plan there was always that the Falcon 1 would be a stepping stone to the Falcon 9 which used the same engines and obsoleted the Falcon 1 on cost/kg to orbit). I did not hear any theories for why so many competitive companies were collectively funded in this sector, more than any other in history. Or how they could address their 10x cost disadvantage (soon to be 100x – 500x when the fully-reusable Starship starts flying).
99% of small sats will be part of large constellations (Starlink, Planet) and best launched en masse.
I do see how a couple of them could address a rapid-launch niche for prototyping, constellation maintenance, and warfighting (deploying replacement satellites on short notice) where the customer would sacrifice cost for speed.
• It has been a golden age for “Venture Space” investment. From 2015-2019, $11 billion has been invested in Venture Space, roughly 10x the annual pace of the preceding five years. There are more than 800 Venture Space companies, though the bulk of dollars have flowed to a small list of companies (roughly half went to SpaceX and OneWeb alone). Among the many drivers for this order-of-magnitude increase in Space investment, two are foundational and will transcend the economic cycle: (1) “low-cost” space and (2) trends in data. On the other hand, we expect one key driver to reverse course, as investors that had piled into Venture Space for outsized returns in recent years see “for sale” signs in other, less-risky industry sectors. Only a subset of space investors are battle-hardened veterans; most of the investment in the last three years has been from newer investors to the sector, some of whom will lack the stomach to continue.
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